A securities class action suit has been filed against the energy firm Warren Resources, alleging that the company issued a series of false and intentionally misleading statements in the run-up to its decision to file for bankruptcy.
Specifically, the suit states that the company made a number of statements prior to its decision to file for bankruptcy in early June which led investors to believe it was on better footing than it actually was, in terms of its ongoing operations and prospects. When the company filed for bankruptcy, its stock price plummeted. The class period for this lawsuit is from Nov. 4, 2014, through the company’s bankruptcy filing date of June 2, 2016.
A bankrupt energy company was recently hit with a securities class action suit.What happened to Warren?
Warren specializes in natural gas and oil extraction, and like many other companies in the industry has been hit hard by the downturn in energy prices over the past two years or so, according to the Wall Street Journal. As such, it decided to file for bankruptcy with some $545.2 million in debts, rather than proceed down its previous path. As part of the filing, it will also receive a $20 million loan so that it can continue some operations in Pennsylvania (natural gas), California (oil extraction), and Wyoming (drilling).
In addition, Warren was able to successfully negotiate with an investment firm to have some $248 million in outstanding debts forgiven in exchange for 82.5 percent ownership of the company, and an additional $130 million in loans from the firm, the report said. It’s expected that the bankruptcy proceedings could be wrapped up by mid-September, but that has some lenders and shareholders concerned as well. Another lender that is set to receive the remaining 17.5 percent of the company – due to an outstanding debt of $167.3 million – claims that such a speedy restructuring plan could leave it in a bad position.
“We can see why [the investment firm receiving 82.5 percent of the company] would like to have this case in and out of court while prices are low,” a lawyer for the lower-ranking lender wrote in a court filing, according to the newspaper.
How the stock price has moved
As one might expect in the event of a bankruptcy filing, Warren’s stock price has plummeted in recent months, according to Google Finance. Today it trades at slightly more than a penny per share. That’s down significantly from the price the day before it filed for bankruptcy, Warren Resources closed at 13 cents per share.
But that number, too, was down from recent highs, the data showed. As recently as March 7, Warren stock was trading at slightly less than 35 cents per share. And around this time last year, it traded at about 67 cents a share. For most of the intervening time, though, prices have fluctuated between 10 and 15 cents.
For more information on this case or other class action litigations, please contact Adam Foulke at 203-987-4949 or info@battea.com.